I always presumed it's part of the film lost when the reel breaks. It certainly makes sense in my opinion
I never thought that part of the film was lost after it broke.
It was pointed out that at that point they stopped coming up with reasons for each character to want to go to Hollywood. When Kermit meets Bunsen and Beaker, they never discuss Hollywood, they just travel with the rest when they leave. Of course, they had been among the crowd, which Kermit may or may not have noticed, and when he says they're going to Hollywood, they are as excited as the rest. With Animal having just destroyed their lab, they were probably happy to get such an offer. Kermit might not have noticed them on the bus until they got there, or maybe Kermit thought he owed them for the damage. But who knows? Maybe Bunsen and Beaker had wanted a career in movies, maybe on the technical side of things, but settled for a back-up career in science, and when Kermit came, they got the opportunity they had wanted?
And in early scripts, after Kermit met Rowlf, the gang met Scooter and Animal, with Scooter just awkwardly asking if they were going to Hollywood, then pointing out that they needed some reason for him to join them.
But on the subject of Rowlf, it seems like he's not entirely happy, though he's content with his life.